The floor price for reserve cotton sales has fallen below 17,300 yuan per ton, with the 7th week (Aug 31-Sep 4) set at 17,228 yuan/ton. This marks the third consecutive weekly decline, with a cumulative drop of about 1.2%. For textile mills still digesting high-priced inventories, this is both pressure and opportunity.
Supply-demand logic behind the price drop
The floor price adjustment is not an isolated event. China Reserve Cotton Management Co. started the 2026 central reserve cotton sales on July 20, and weekly floor prices have been dynamically adjusted based on market conditions. The 7th-week price is about 270 yuan/ton lower than the first week (around 17,500 yuan/ton), a 1.5% decrease. This trend mirrors the weak domestic spot market and slower-than-expected downstream demand recovery.
On the supply side, the upcoming new cotton harvest, high commercial inventories, and continuous reserve releases have increased market supply. On the demand side, textile mills are placing mainly short-term, small orders, maintaining just-in-time raw material purchases with limited restocking appetite. Under a loose supply-demand balance, the floor price decline is a natural market rebalancing.
Quality premium/discount: gap between floor and actual prices
It is worth noting that the floor price is not the final transaction price. According to the sales announcement, the actual floor price for each daily batch is calculated based on the standard-grade (3128B) floor price, adjusted by the notarized inspection results and the quality differential table issued by the China Cotton Association. This mechanism will lead to significant price divergence among batches of different quality.
For buyers, this means the floor price is only a reference anchor. In actual transactions, higher-grade cotton may command a premium, while lower-grade cotton may be discounted. Enterprises should focus on the quality indicators of daily listed batches rather than just the floor price number. For example, if a batch has better length or strength than the standard grade, its actual floor price may be higher than 17,228 yuan/ton; conversely, batches with lower Micronaire or higher impurity content may be cheaper.
Industry impact: restocking window and procurement strategy
The consecutive floor price declines are a double-edged sword for textile mills. On one hand, raw material cost pressure has eased, especially for small and medium-sized spinning mills with thin profit margins; a difference of a few hundred yuan per ton can directly affect profitability. On the other hand, the downward trend may prompt enterprises to delay purchases in anticipation of even lower prices, leading to a wait-and-see sentiment.
Historically, the reserve cotton sales floor price tends to move in tandem with spot prices. When the floor price stabilizes, it often signals a short-term bottom. The current 7th-week floor price showed only a slight decline from the previous week, with narrowing declines, possibly indicating that the market is approaching a short-term bottom. For enterprises with stable orders and low inventories, moderate restocking now may be better than waiting further.